NOTE 5: INVESTMENT SECURITIES

6 Months Ended

Jun. 30, 2020

Notes

NOTE 5: INVESTMENT SECURITIES

NOTE 5: INVESTMENT SECURITIES

The amortized cost and fair values of securities classified as available-for-sale were as follows:

		June 30, 2020
				Gross		Gross
		Amortized		Unrealized		Unrealized		Fair
		Cost		Gains		Losses		Value
		(In Thousands)
AVAILABLE-FOR-SALE SECURITIES:
Agency mortgage-backed securities	$	153,376	$	20,646	$	-	$	174,022
Agency collateralized mortgage obligations		169,607		10,226		-		179,833
States and political subdivisions		69,203		2,002		2		71,203
Small Business Administration securities		21,126		751		-		21,877
	$	413,312	$	33,625	$	2	$	446,935

		December 31, 2019
				Gross		Gross
		Amortized		Unrealized		Unrealized		Fair
		Cost		Gains		Losses		Value
		(In Thousands)
AVAILABLE-FOR-SALE SECURITIES:
Agency mortgage-backed securities	$	156,591	$	8,716	$	265	$	165,042
Agency collateralized mortgage obligations		149,980		2,891		921		151,950
States and political subdivisions		33,757		1,368		-		35,125
Small Business Administration securities		22,132		-		74		22,058
	$	362,460	$	12,975	$	1,260	$	374,175

The amortized cost and fair value of available-for-sale securities at June 30, 2020, by contractual maturity, are shown below.  Expected maturities will differ from contractual maturities because issuers may have the right to call or prepay obligations with or without call or prepayment penalties.

		Amortized		Fair
		Cost		Value
		(In Thousands)
One year or less	$	-	$	-
After one through five years		-		-
After five through ten years		12,572		13,172
After ten years		56,631		58,031
Securities not due on a single maturity date		344,109		375,732
	$	413,312	$	446,935

There were no securities classified as held to maturity at June 30, 2020 or December 31, 2019.

Certain investments in debt securities are reported in the financial statements at an amount less than their historical cost. Total fair value of these investments at June 30, 2020 and December 31, 2019, was approximately $504,000 and $116.2 million, respectively, which is approximately 0.1% and 31.1% of the Company’s available-for-sale investment portfolio, respectively.

Based on an evaluation of available evidence, including recent changes in market interest rates, credit rating information and information obtained from regulatory filings, management believes the declines in fair value for these debt securities are temporary.

The following table shows the Company’s gross unrealized losses and fair value, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position at June 30, 2020 and December 31, 2019:

		June 30, 2020
		Less than 12 Months				12 Months or More				Total
		Fair		Unrealized		Fair		Unrealized		Fair		Unrealized
Description of Securities		Value		Losses		Value		Losses		Value		Losses
		(In Thousands)
States and political subdivisions	$	504	$	(2)	$	-	$	-	$	504	$	(2)
	$	504	$	(2)	$	-	$	-	$	504	$	(2)

		December 31, 2019
		Less than 12 Months				12 Months or More				Total
		Fair		Unrealized		Fair		Unrealized		Fair		Unrealized
Description of Securities		Value		Losses		Value		Losses		Value		Losses
		(In Thousands)
Agency mortgage-backed securities	$	-	$	-	$	24,762	$	(265)	$	24,762	$	(265)
Agency collateralized mortgage obligations		69,372		(921)		-		-		69,372		(921)
Small Business Administration securities		22,058		(74)		-		-		22,058		(74)
	$	91,430	$	(995)	$	24,762	$	(265)	$	116,192	$	(1,260)

Gross gains of $78,000 resulting from sales of available-for-sale securities were realized during the three and six months ended June 30, 2020. No gains or losses from sales of available-for-sale securities were realized during the three months ended June 30, 2019. Gross gains of $226,000 and gross losses of $216,000 resulting from sales of available-for-sale securities were realized during the six months ended June 30, 2019.  Gains and losses on sales of securities are determined on the specific-identification method.

Other-than-temporary Impairment.  Upon acquisition of a security, the Company decides whether it is within the scope of the accounting guidance for beneficial interests in securitized financial assets or will be evaluated for impairment under the accounting guidance for investments in debt and equity securities.

The accounting guidance for beneficial interests in securitized financial assets provides incremental impairment guidance for a subset of the debt securities within the scope of the guidance for investments in debt and equity securities.  For securities where the security is a beneficial interest in securitized financial assets, the Company uses the beneficial interests in securitized financial asset impairment model.  For securities where the security is not a beneficial interest in securitized financial assets, the Company uses the debt and equity securities impairment model.  The Company does not currently have securities within the scope of this guidance for beneficial interests in securitized financial assets.

The Company periodically evaluates each investment security in an unrealized loss position to determine whether an other-than-temporary impairment has occurred.  The Company considers the length of time a security has been in an unrealized loss position, the relative amount of the unrealized loss compared to the carrying value of the security, the type of security and other factors.  If certain criteria are met, the Company performs additional review and evaluation using observable market values or various inputs in economic models to determine if an unrealized loss is other-than-temporary.  The Company uses quoted market prices for marketable equity securities and uses broker

pricing quotes based on observable inputs for equity investments that are not traded on a stock exchange.  For non-agency collateralized mortgage obligations, to determine if the unrealized loss is other than temporary, the Company projects total estimated defaults of the underlying assets (mortgages) and multiplies that calculated amount by an estimate of realizable value upon sale in the marketplace (severity) in order to determine the projected collateral loss.  The Company also evaluates any current credit enhancement underlying these securities to determine the impact on cash flows.  If the Company determines that a given security position will be subject to a write-down or loss, the Company records the expected credit loss as a charge to earnings.

During the three and six months ended June 30, 2020, no securities were determined to have impairment that had become other-than-temporary.  

Credit Losses Recognized on Investments.  During the three and six months ended June 30, 2020 and 2019, respectively, there were no debt securities that had experienced fair value deterioration due to credit losses, as well as due to other market factors, but are not otherwise other-than-temporarily impaired.